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Citation: 2003TCC210
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Date: 20030414
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Docket: 2002-683(GST)I
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BETWEEN:
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COMPLETE CUISINE & FINE FOODS TO GO
(1988) LTD.,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
REASONS FOR JUDGMENT
Beaubier, J.T.C.C.
[1] This appeal pursuant to the
Informal Procedure was heard at Victoria, British Columbia, on
April 2, 2003. Roy Greve, the founder of the Appellant, testified
on behalf of the Appellant. Rosa Liu, B. Comm., C.G.A., testified
on behalf of the Respondent.
[2] Paragraphs 3 to 8 inclusive of the
Reply to the Notice of Appeal outline the matters in issue. They
read:
3. By Notice
of Assessment numbered 11CU2000256, dated September 18, 2001, the
Minister of National Revenue (the "Minister") assessed
the Appellant for under-reported Goods and Services Tax
("GST") of $16,521.31, as detailed in the attached
Schedule "A", plus corresponding penalty and interest
of $1,961.76 and $1,658.26, respectively, for the reporting
period from October 1, 1998 to September 30, 2000, (the
"Assessment Period").
4. A Notice of
Objection was filed on September 28, 2001.
5. By Notice
of Decision dated January 15, 2002, the Minister confirmed the
assessment.
6. In so
assessing the Appellant, the Minister relied on the following
assumptions of fact:
a) the
Appellant was incorporated in British Columbia on October 5,
1988;
b) the
Appellant registered under Part IX of the Excise Tax Act,
R.S.C. 1985, c. E-15, (the "Act") effective
January 1, 1991, and was assigned a GST registration number
101076826;
c) the
Appellant was required to file quarterly GST returns;
d) the
Appellant's major business activity is providing take-out
gourmet food and catering services;
e) at all
material times, the Appellant advertised itself as a caterer;
f) at
all material times, the Appellant provided supplies that were
zero-rated and taxable at the standard rate of 7%;
g) at all
material times, the Appellant's supplies taxable at 7%
included:
i) the
delivery of non-frozen meals;
ii) sandwiches
and soups;
iii) desserts and
cookies;
iv) party trays;
and
v) catering
services;
h) for the
Assessment Period, the Appellant filed its GST returns reporting
GST of $1,860.51 and input tax credits ("ITCs") of
$20,856.46, claiming net refunds of $18,995.95, as detailed in
Schedule "B";
i) by
Notice of Assessment numbered 11CU2000256, dated September 18,
2001, the Minister assessed the Appellant for under-reported GST
of $16,521.31 in respect of prepared meals (the
"Meals");
j) at
all material times, the Appellant prepared and cooked all the
food that formed part of the Meals;
k) in respect
of the meals, the Appellant offered a menu of seven dishes for a
fixed price of $6.50 per dish or serving;
l) the
Meals could either be picked up by the customers or delivered for
an additional fee;
m) the Meals
consisted of refrigerated, fully cooked foods;
n) at all
material times, the Meals were not supplies of frozen food;
and
o) in
preparing the Meals, the Appellant processed and arranged the
food to the customer's specifications, and after they were
re-heated the Meals were ready to eat.
B. ISSUES
TO BE DECIDED
7. The issue
is whether the Meals are taxable at the standard rate of 7
percent.
C.
STATUTORY PROVISIONS RELIED ON
8. He relies
on subsection 123(1) and sections 165, 221, 222, 228, 238, 280
and 296 of the Excise Tax Act, R.S.C. 1985, c. E-15 (the
"Act"), as amended, and paragraph 1(o.5) of Part
III of Schedule VI.
[3] The following paragraphs and
subparagraphs of the assumptions in paragraph 6 were not
refuted:
a); b);
c); g) ii), iii), and iv); h); i); j); k); and l).
[4] By the remaining paragraphs and
subparagraphs of paragraph 6, the Court finds:
6 d) The Appellant's major business
activity is providing the supply, by way of over the counter sale
of delicatessen food;
6 e) Is only correct because the Appellant
advertised, inter alia under the "catering"
title in the Yellow Pages of the Victoria telephone book.
6 f) Is in dispute in regard prepared
non-frozen meals that were delivered to customers.
6 g) i) Is the subject matter of the action. The Appellant
prepared vegetables to the blanched stage in large quantities
which were then immediately refrigerated for 24 hours; starches
(potatoes, rice, pasta) were also prepared, cooked and
refrigerated for 24 hours; meat, poultry and fish were also
partially cooked to a fixed temperature in large quantities and
refrigerated (quick cooled) for 24 hours. After the 24 hours
these were assembled in 7" aluminium foil packages to a
fixed total weight and sold in the package for $6.50 plus a
delivery charge. The meat or fish portion in the package was a
fixed weight which varied according to the Appellant's costs.
The remaining ingredients were added into the package to arrive
at a total uniform weight for each package. If a customer
telephoned an order and specified another precooked vegetable
that the Appellant had refrigerated, that vegetable could be
substituted for the vegetable that the Appellant had planned for
that package group. The result is that the Appellant argued that
it was selling a fixed weight of food, while the Respondent
argued that it was catering a meal. The food was not fully
cooked. The directions on each package ordered the purchaser to
heat the contents in an oven at 375 º for 30 minutes or to
microwave the contents on another container for 3 minutes.
(Exhibit R-2). Mr. Greve is a professional chef and he
testified that these directions had to be carried out to complete
the cooking process. The Court accepts this testimony by Mr.
Greve. Finally, if any pre-packed packages were left in stock at
the end of the day, they were frozen and sold as frozen food;
these are not the subject of this assessment.
6 g) v) The concept of "catering services" will be
dealt with later in these Reasons
6 m) Therefore, the Court finds that the food was
not fully cooked when it was delivered to the customer. The
customer had to heat the contents of the package pursuant to its
directions to finish the cooking process.
[5] The question then is whether the
cooked food in the delivered packages was a supply of food or
beverages sold under a contract for, or in conjunction with,
catering services pursuant to paragraph 1 (o.5) of the Part III
of Schedule VI of the Excise Tax Act.
[6] "Catering" is defined by
the Oxford Dictionary, Second Edition, as:
Purveying of food or other requisites.
and
That caters; concerned with catering.
[7] The phrase used in the Act
is "catering services". The word "service" is
defined by the Oxford Dictionary, Second Edition, as
"performance of the duties of a 'servant' for work
done in obedience to and for the benefit of a master". Thus
the catering service must be performed for the benefit of the
caterer. In this case the purchaser must perform the cooking
services for him or herself. The Appellant is not required to
perform any catering services. The word "services"
indicates more than merely purveying or selling food on other
requisites.
[8] "O"rated items under
Part III 1. (o.5) include "supplies of food or beverages for
human consumption...other than supplies of ...(o.5)
food or beverages sold under a contract for, or in conjunction
with, catering services".
[9] The Appellant did not supply any
services in conjunction with food. It merely sold a package of
food. It did deliver the package on request, and for an
additional fee, as many grocery stores still deliver groceries.
But the delivery service was just that. It had nothing to do with
the food. The delivery might have been for a pair of shoes and it
would not have required any more effort or service.
[10] Upon receipt of the package, a
purchaser had to cook the food before it could be consumed. The
food in the package had not been completely cooked by the
Appellant. More than mere "warming" was required. The
directions on each package stated the following:
CHEF ON THE RUN
2020 Oak Bay Ave
Victoria
Tel: (250) 595-3151
HEATING GUIDELINES
OVEN - preferred method
Always leave foil lid on
FRESH DINNERS
Preheat oven to 375 º
Heat in oven for 30 min.
Leave foil lid on.
FROZEN DINNERS
Preheat oven to 425 º
Place frozen dinner in oven
- 45 minutes
MICROWAVE METHOD
*FRESH DINNERS ONLY*
Transfer to plate
Heat approx 3 minutes
on high
[11] The Appellant did not supply any
amenities or "additional amenities".
[12] Moreover, Mr. Greve stated that many of
the Appellant's customers make more than one serving from the
package; a subsequent meal can be made from remnants; the
contents cannot be consumed on the spot; normally a preparer
would put the package contents on one or more plates after
cooking it; and utensils are required to eat the cooked contents.
In fact, it is not even up to the standard of preparation of a
can of pork and beans which can be eaten cold straight from the
can. This must be cooked first by the purchaser.
[13] The appeal is allowed. The Appellant is
awarded its party and party costs.
Signed at Saskatoon, Saskatchewan, this 14th day of April
2003.
J.T.C.C.
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